Term Life Insurance or Mortgage Life Insurance – What’s The Best Way To Protect Your Home Investment AND Your Loved Ones In the Event of Death Before The Mortgage Is Paid In Full?
Purchasing a home is probably one of THE BIGGEST investments you will ever make as well as the largest financial responsibility. And it’s important to protect that investment and responsibility. Life insurance is an excellent way and at the same time provide peace of mind to your loved ones, affording them the means to remain in that home after you’re gone.
But what is the best insurance to protect your home investment?
Both term life insurance and mortgage life insurance provide a way to pay off a mortgage. Both types of coverage require you to make regular premium payments to keep the policy in force.
Term life insurance is a policy that you purchase for a specific “term” with a level premium for the duration of the policy’s term. Your beneficiary would receive the benefit should you pass away and they would be able to use the benefit to pay off the mortgage as well as any other expenses there may be at the time of death, depending on the amount of the policy.
Mortgage life insurance is a coverage that protects ONLY your mortgage. You purchase it from your lender and your mortgage lender is the beneficiary of the policy, NOT your loved one. If you pass away, your lender would be paid the balance of the mortgage.
IMPORTANT - Don’t confuse mortgage life insurance with private mortgage insurance (PMI).
PMI protects your lender and is required by your lender if you have put less than 20% down on your home. PMI protects your lender if you stop making your loan payments.
Mortgage life insurance premiums remain the same, but the benefit decreases as you pay down your mortgage. So, as you pay down your mortgage, you are receiving less benefit for the amount of money you are spending.
Term life insurance premiums remain the same during the “term” and your benefit stays the same. As you pay down your mortgage, should you pass away before the mortgage is paid, your beneficiary would have extra money to use to pay off other bills, etc.
With term life insurance, you have more choices when it comes to setting the term of your policy and the amount of the benefit as opposed to mortgage life insurance where you only purchase the amount of your mortgage. Also, mortgage life insurance policies usually cost more than term life insurance policies.
Get a Term Life Insurance Quote
After examining the differences in term life insurance and mortgage life insurance, it’s easy to see how a term life insurance policy might be a better fit and smarter option for protecting your home investment and your loved ones after death. Contact me for more info and to receive a term life insurance quote.